Montreal bank (TSX: BMO) Just hit a new high. Investors who have missed the large meeting in recent months are wondering if BMO shares are still undervalued and are good to buy for a self-driven tax-free savings account or registered pension savings plan (RRSP) aimed at dividends and total returns.
Bank of Montreal stock price
Bank of Montreal acts almost $ 165 per share at the time of writing. The share has risen by 47% in the past year and has now achieved the previous record high in the beginning of 2022.
The recent struiting is the third stage of a rebound that actually started in the end of 2023 when the Bank of Canada and the American Federal Reserve decided to stop increasing interest rates in their struggle to get inflation under control. Higher interest rates are usually positive for banks, because they enable the banks to generate higher net interest rate margins. The steep rise in rates for such a short period, however, put pressure on companies and households with too many debts. This led to the fear that the economy would slide into a recession and the standard values would rise.
The economic dive did not come out and the cutbacks of the central banks in the second half of 2024 helped to alleviate the pressure on borrowers. That said, Bank of Montreal and her colleagues still had to increase the provisions for credit losses (PCL) for customers who had difficulty making their loan payments.
Gain
Bank of Montreal has just reported a solid tax income of the third quarter (Q3) 2025. Corrected net income came in the quarter at $ 2.4 billion compared to $ 1.98 billion in the same period last year. Improvements in the American company drove most of the profits, with an adapted net income rising by 42% compared to tax Q3 2024. Weather step management activities also delivered a stronger performance, with an adapted net income with 21% years after year. Activities of capital markets yielded a profit of 12% on the adjusted net result. Canadian personally and commercial banking, however, saw adapted net income drops by 5%. Higher PCL in the division and increased expenditure compensated for a turnover of 6%.
Bank of Montreal reported PCL of $ 797 million in the quarter, decrease of $ 906 million in Q3 2024. The improvement came from lower provisions for credit losses in the groups of commercial banking and capital markets. Investors will want to keep an eye on the PCL numbers in the coming quarters, especially in Canada.
Risks
American rates can increase inflation in the coming months if companies will pass on the higher costs to consumers. This can lead to an economic delay, while interest rates remain increased. The American Federal Reserve is expected to lower the rates as soon as next month. This would offer some lighting for stretched borrowers, but a unemployment protection can still reverse the trend of a lower loss of loans.
Unemployment has already risen in Canada in the past year. Rates and current trade negotiations with the US force companies and consumers to be careful with their expenses. A recession can cause a peak in job losses and push PCL even higher in the coming quarters.
Time to buy?
Bank of Montreal could continue to hit new highlights in the coming months if Canada and the US will have a trade agreement in the short term and the economy prevents them from sliding into a recession. That said, the share has had a big run and there are risks that things can become a bit messy for the economy that will be on its way next year. You pay the dividend yield of 4% well to drive out some turbulence if you already have the stock. New buyers may want to wait for a pullback to start a position.
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